1 Price Interaction between Aquaculture and Fishery Roberta Brigante, IREPA and Audun Lem, FAO XIII EAFE CONFERENCE SALERNO APRIL 2001

2 PRICE INTERACTION BETWEEN AQUACULTURE AND CAPTURE FISHERIES An econometric analysis of seabream and seabass in the Italian market

3 RATIONALE FOR STUDY aquaculture accused of unfair price competition lack of data and studies Italian market in great turmoil –increasing imports –declining own catch –Italian and Mediterranean aquaculture production increasing –Italy main market for seabass/seabream from Greece, Turkey, Spain etc.

4 DIVISION OF WORK FAO GLOBEFISH: data, overall co- ordination IREPA: data, analysis and scientific supervision

5 PAPER OUTLINE 1. State of fishing and aquaculture 2. Methodology 3. Presentation of data used for analysis 4. Results of econometric analysis 5. Conclusions

6 THE STATE OF WORLD FISHERIES AND AQUACULTURE (SOFIA ) Growing aquaculture sector unsustainability overexploitation FAO Code of Conduct for responsible fisheries

7 METHODOLOGY Econometric models –Identify appropriate model ( LSE analysis) “from general to particular” –first phase: general model with lags in endogenous and exogenous variability –second phase: test correct specification of general model, significance and stability of parameters; deletion of non-significant parameters, estimation of resultant model –nine restrictions and nine models

8 ERROR CORRECTION MODEL (ECM ) Engle and Granger: If variables are co-integrated, estimate an ECM model If no co-integration, there is no long run equilibrium curve. In this case, the model that you can estimate is a first differences model.

9 THE DATA quarterly seabass and seabream prices, capture and aquaculture source: IREPA, FAO, Italy capture prices: fairly stable with in-year vacillation farmed prices: long-term decline capture quantities:fairly stable farmed quantities: significant increase

10 logarithmic specification of price time series LC and LA Dependent variable: LC Independent var.: LC, four times lagged –variable LA –variable LA, lagged –3 dummies: seasonal –2 dummies: exceptional values –deterministic trend T THE ECONOMETRIC MODEL

11 Seabass Seabream RESULTS

12 Some co-integration between LC and LA, but no satisfactory results Granger causality test confirms result Farmed seabass no substitute for captured seabass (or vv) SEABASS

13 Models give satisfactory results LC and LA stationary no linkage between prices Granger causality test confirms result Farmed seabream no substitute for captured seabream (or vv) SEABREAM

14 captured and farmed seabass and seabream in Italy: not subsitutes no link between prices long-term change in farmed prices no impact on long-term capture prices Granger causality test confirms results CONCLUSIONS

15 two distinct markets each market should focus on its specific strengths falling farmed prices can be countered only by emphasis on quality, products diversification, improved logistics IMPLICATIONS

16 THANK YOU !